If inflation allows, BC may again reduce interest rates in the 2nd half of 2023, says president of Itaú

For the president of Itaú Unibanco, Milton Maluhy Filho, depending on the dynamics of inflation in the coming months, the BC (Central Bank) may be able to start a process of cutting interest rates in the middle of the second half of 2023.

“In case inflationary pressures cool down consistently, the Central Bank may gradually and cautiously return to reducing interest rates at some point in the second half of next year,” said the executive, at an event promoted by Itaú this Thursday. fair (8).

In recent weeks, discussions on the fiscal policy of the elected government of Luiz Inácio Lula da Silva (PT), with the negotiations around the PEC (proposed amendment to the Constitution) of the Transition, approved on Wednesday (7) in the Senate , increased the nervousness of investors in the financial market, who began to review the trajectory of inflation and interest rates ahead, with a scenario not discarded by some that the BC has to resume the process of raising interest rates.

This Wednesday (7th), the BC maintained the Selic rate at 13.75% per annum for the third consecutive meeting, but warned of the fiscal risk.

In the Focus report, economists consulted by the monetary authority project the Selic rate at 11.75% in December 2023, compared to a previous estimate of 11.50% last week. Itaú has a more optimistic view, projecting the basic interest rate at 11% at the end of next year.

Maluhy Filho also stated that, due to the fact that the Central Bank started the monetary tightening process before global peers, the Brazilian economy should show a slowdown in the pace of growth, with the lagged and cumulative effects of high interest rates being concentrated in 2023.

The fact that the major economies will also be in a process of decelerating growth should also influence the performance of the Brazilian GDP, in the wake of the increase in interest rates by the central banks of the developed markets, said the president of the bank.

“The world’s GDP should not present a contraction, it should not be a negative GDP next year, but the thermal sensation could be of a global recession”, said the executive, who classified the stimulus measures adopted on a global scale to reheat the economies by account of Covid as “beyond necessary and reasonable”.

According to Maluhy Filho, 2023 will be a year of transition. “In the global economy, from inflation to disinflation, transition in our economic policy, from the spending cap to a new regime that will reconcile, and we hope so, social responsibility and fiscal responsibility”.

“Fintechs are already ‘big’ and are starting to bring a systemic risk”

For the president of Itaú Unibanco, technology has stimulated increased competition between large banks and fintechs in recent years.

“Technology has eliminated many entry barriers. In the past, we boasted of our systems and scale, and today technology allows you to be very efficient, you don’t need to have the scale that a large bank has to be competitive and deliver a price with a quality product at the end,” he said.

He also said that, with the rise in interest rates, investors who had turned their attention to businesses based on digital models and the expectation of accelerated growth in the future began to review their priorities. “It’s no use having a business that is not economically viable.”

The president of Itaú stated that, in the new era of interest rates closer to historical averages, fintechs are increasingly looking for ways to monetize their businesses to deliver sustainable results to shareholders.

“Several of them are changing their business models. What used to be a remuneration for a 100% CDI account, now you no longer remunerate if the client turns over the resource before 30 days, which happens in the vast majority of cases”, he said, in apparent reference to the measure announced by Nubank in July.

Maluhy Filho said that today he sees the market as “much more rational” in resource allocation strategies in new digital companies, but that many will survive and are doing an excellent job.

Regarding the regulatory framework and the changes promoted in the market legislation, with an increase in the minimum capital requirement for fintechs to operate, the president of the bank stated that the measures that have been adopted by Organs regulatory bodies are in the right direction.

“Proportionality needs to happen. Several are no longer small, they were born, they have grown up, they are big, and they start to bring a systemic risk if they have a problem.”

He also said that the strategy of some fintechs to offer credit cards with no annual fee with a focus on a low-income public contributes to the indebtedness of a portion of the population that does not have financial education. “What we observed is that there was an oversupply of the card product in the market. We have significantly reduced the offer of the card in the open sea”, stated the president of Itaú.